Seven Things To Avoid To Keep Your Wealth

Making money and getting wealthy are two different things. Told in another way: It’s not what you make, it’s what you keep. And how you spend the money you keep—how you treat it and how much you respect it—makes a world of difference.

According to the book “Money for Nothing: One Man’s Journey Through the Dark Side of Lottery Millions,” nearly 70 percent of lottery winners go broke within seven years. As an example, a person wins a lottery and blows the winnings on opportunistic friends and family, half-baked investment opportunities and extravagant living. Whilst another, like Elon Musk, sells a business for a nice profit, reinvests the bulk of the proceeds into a new business and, over time, becomes a billionaire.

Some retire early and sail the world, others try to keep the toys they’ve acquired while struggling to make ends meet. Wealth accumulation isn’t so much about making money, it’s about the attitudes and behaviors people indulge in while acquiring it, as well as the decisions they make when managing it.

To help keep on the path to getting yourself wealthy, here are seven common financial blunders to avoid at all cost:

1. Putting Pleasure Ahead of Freedom

It’s human nature to seek enjoyment and comfort. But you need to understand that short-term gratification is a trap of the middle class. Fancy houses, expensive cars, and the latest and greatest toys have their place in life, but not when you’re just beginning your journey to wealth accumulation. You can’t fund growth when all of your investable cash is tied up sustaining your lifestyle.

Rather than settling for creature comforts, wealthy people look beyond short-term gratification and set their sights on achieving true financial freedom. By seizing every opportunity to put their money to work for them, over time, they can fund an abundant lifestyle, rich with opportunities to live life on their terms.

2. Diversifying Investments

Contrary to what you’ve heard and read ever since you first started learning about investing, diversification is for suckers. It works well for the banks that sell money management services, but if you want to make serious cash, it’s far more effective to learn everything you can about a specific investment class, identify the right opportunity and then go all in. As Andrew Carnegie once said, “Put all your eggs in one basket and then watch that basket.”

3. Having Only One Source of Income

This happens to almost everyone, especially those who earn a good salary. They rely exclusively on one source of income—usually their job—and, without meaning to, they become slaves to it. Call it another case of getting trapped in a lifestyle choice; money that should fund income-producing investments is consumed through spending and, if the job goes away, everything gets wiped out.

The key to wealth accumulation is having multiple streams of passive income. A modest home and two cash flow positive investment properties beat a fancy house with a huge debt load any day of the week.

4. Looking at Others

It’s always tempting to compare your financial situation with someone else’s. But it does no good whatsoever. The fact is, whether you’re trying to keep up with the Joneses by having as much as they appear to have or you’re counting your blessings because you’re better off than someone who’s starving half a world away, the financial condition of others has no bearing on your own.

If the Joneses suddenly go belly up, or that starving person suddenly strikes it rich, your personal finances will remain unchanged. So, stop looking at others for validation and focus on what you need to do to accumulate wealth.

5. Jumping on Trends

They say a fool and his money were lucky enough to get together in the first place. No one will think twice about taking it from him, especially people who are peddling investments. Smart investors, the ones who accumulate lasting wealth, shun hot fads and trendy developments in the marketplace.

Trying to predict the next big thing, or the future of some hot new social media stock, is a fool’s errand. Better to focus on tried and true investment vehicles that you fully understand, such as real estate, insurance or food companies. In other words, simple things that people need and use on a daily basis, which aren’t likely to disappear anytime soon.

6. Investing on Emotion

To become a successful investor is to become someone who excels at doing his or her homework. Due diligence is what separates investors from gamblers, and that means taking your emotions out of the equation and relying only on what you have proven to be true.

This is especially true when considering investment opportunities brought to you by friends and family. If you’re not comfortable asking them for documentation or evidence of claims they’re making, then you shouldn’t be doing business with them. Every detail should be verified before committing any funds.

7. Saving without Investing

Without question, you should have some savings set aside. But understand that you’ll never accumulate wealth by simply saving your money. The interest banks pay on savings accounts is way too low to yield a meaningful impact.

You need to invest. If you’re not ready to invest yet, that’s fine, but you might want to consider moving money out of your easily accessible savings account and into a financial vehicle that’s tougher to dip into, such as a brokerage account that you plan to use when you’re ready to invest. Doing so will make it harder for you to pull money out of your savings. It’ll also make your brokerage account seem more “real,” which may even incentivize you to start investing sooner.